Broadcasting Industry Overview

EQUITYRESEARCH RBC Capital Markets, LLC
David Bank (Analyst)
(212) 858-7333
david.bank@rbccm.com
Nicholas Caplan (Associate)
(212) 428-6412
nicholas.caplan@rbccm.com
Kristina Warmus (Associate)
(212) 428-6622
kristina.warmus@rbccm.com
February 4, 2014
Broadcasting Industry Overview
Primer on the Broadcast TV Business
The Local Broadcast TV Business Has Been Structurally Transformed by the Continuously Upward
Trajectory of Retransmission Consent—We believe that local broadcast station retransmission consent,
which currently stands ~$1/sub/month, is on a steady trajectory approaching ~$2/sub sometime in the
next four to five years.
• The broadcast industry is expected to see aggregate incremental revenue of nearly $4 billion over this
period. While some of this windfall will be redistributed back to the Broadcast Networks providing
much of the primetime and sports content driving these fees, the positive impact on top line and
margins should be substantial.
Despite the Hype, Core Ad Trends Are Solid—Local TV ad growth should remain in the low to mid single-
digit range for our investable time horizon. This should be driven by key ties to the automotive and
political advertising cycle, in particular.
In Broadcast TV, the Insatiable Desire for Scale Is Driving Consolidation—Scale is a key element to
garnering greater negotiating leverage with the MVPD ecosystem. Further, scale is also a powerful tool
in negotiating reverse compensation with the broadcast networks. Negotiating dynamics have arguably
affected the smaller station groups most dramatically, as smaller station groups generally have the least
leverage. Less leverage for station owners is expected to result in both (1) lower retransmission consent
payments from distributors and (2) higher reverse compensation payments to the broadcast networks
that the stations are affiliated with.
• The ability to take advantage of “as acquired” clauses in retransmission consent agreements should
also continue to serve as a major driver of consolidation over the next several years.
Local TV Broadcasters Will Likely, Finally, Be Able to Monetize Their Spectrum—We remain confident
the FCC is likely to commence the long anticipated Incentive Auction for broadcast spectrum some time
in 2015. We would expect, at least a proposed if not completely finalized, FCC sponsored spectrum and
"repack" plan at some point in 2014, providing a highly visible catalyst for potential value realization.
Aereo Risk Binary, but Even in Worst Case, We Believe Business Case Is Somewhat Protected and
Spectrum Offers Downside Protection—If Aereo prevails in the Supreme Court case, which is expected
to be decided by June 2014, then the multi-year duration of existing retrans contacts, the time and cost
for MSOs to deploy equipment to exploit Aereo technology including set-top boxes, and the potential
for broadcasters to charge retrans fees anyway (even with an Aereo-type product) indicates to us that
any negative impact to the broadcast business case is likely more limited than one might think.
Priced as of prior trading day's market close, EST (unless otherwise noted).
All values in USD unless otherwise noted.
For Required Conflicts Disclosures, see Page 48.

Table of Contents
Industry Overview................................................................................................................3
Summary Investment Highlights...........................................................................................4
Key Investment Themes .......................................................................................................7
The State of the Industry Remains Robust.................................................................................7
Overall Advertising Trends Remain Strong Too .......................................................................14
Consolidation Has Been Rampant............................................................................................17
Retransmission Consent: Capturing Underlying Content Value and Leveraging “As Acquired”
Clauses .....................................................................................................................................22
Spectrum: Opportunity, Asset, and a Floor..............................................................................24
Key Investor Concerns........................................................................................................32
Aereo – Loopholes, Litigation and Legislation Could Impact the Retransmission Consent
Paradigm ..................................................................................................................................32
Other Risks ...............................................................................................................................34
Industry Notes....................................................................................................................37
Industry Structure ....................................................................................................................37
Spectrum Summary..................................................................................................................38
February 4, 2014 2

Industry Overview
Exhibit 1: Television Station Company Operations Comparisons
Ticker SBGI NXST GCI LIN GTN MEG*
Company Sinclair Broadcast Group Inc.
Nexstar Broadcasting Group,
Inc.
Tribune Company Gannett Co., Inc. LIN Media LLC Gray Television, Inc. Media General, Inc.
Price as of: 02/03/2014 $30.09 $46.77 $26.51 $23.62 $10.87 $17.24
2012 Segments/Revenues Sources
Total Company Revenue
Ad revenue is before agency
comnissions
Includes est. BLC contrib.
B'cast includes ad, retrans,
station website, and other.
Interactive inc'ls station
websites, LIN Digital, Nami
Media
Internet revenues associated
with stations' websites
Ad revenue is before agency
commissions; Digital related
to local websites
$1.0 bn $0.4 bn $1.1 bn $0.9 bn $0.6 bn $0.4 bn $0.4 bn
KEY OPERATIONAL METRICS (As Reported & RBC Estimates)
Number of Stations
2
141 74 42 40 43 40 31
Percent Of Stations with Big 4 Affiliation
4
63% 81% 57% 85% 74% 95% 93.5%
Percent Of HHs in Top 25 Markets 21% 10% 70% 73% 5% 0% 30%
Unique Nielsen Markets 71 43 33 31 23 30 28
With Duopoly+ 45 26 9 8 14 8 3
Percent Coverage (Undiscounted) 35% 13% 44% 30% 11% 6% 14%
Percent Coverage (after UHF disc) 20% 7% 27% ~23-24% 8% 4% 10%
Number of Stations2
164 108 42 40 43 55 31
Percent Of Stations with Big 4 Affiliation4
66% 80% 57% 85% 74% 96% 94%
Average TVHH per Station ('000)3
580 302 1,430 1,092 557 197 584
Unique Nielsen Markets 77 56 33 31 23 40 28
With Duopoly+ 49 35 9 8 14 11 3
Percent Coverage (Undiscounted) 39% 16% 44% 30% 11% 7% 14%
Percent Coverage (after UHF disc) 24% 10% 27% ~23-24% 8% 5% 10%
Other Assets Include (not necessarily
comprehensive):
Regional Cable News Channel
(Pending Acquisition)
WGN America, Antenna TV
(also has Publishing assets but
split pending)
Cable News Chans,
Publishing, Capitivate, &
CareerBuilder Lin Digital, Nami Media
Current Net Leverage Ratio1
4.0x 4.9x 2.5x 4.1x 5.5x 4.3x
Pro-formaActual
Total TV Revenue
Non-
Politic
al Ad
67%
Politic
al Ad
12%
Retra
ns
15%
eMedi
a
5%
Other
1%
Publis
hing
59%
Digita
l
12%
Broad
castin
g
25%
All
Other
4%
Non-
Politic
al Ad
77%
Politic
al Ad
14%
Intera
ctive
7%
Other
2%
Non-
Politic
al Ad
61.3%
Politic
al Ad
21.2%
Retra
ns
8.3%
Intern
et
6.2%
Other
3.0%
Non-
Politic
al Ad
71.7%
Politic
al Ad
16.2%
Retra
ns
9.6%
Digita
l
2.5%
B'cast
(TV
Ad)
27%
B'cast
(Othe
r)
9%
Publis
hing
64%
Non-
Politic
al Ad
58.9%
Politic
al Ad
9.1%
Retra
ns (E)
18.6%
Barter
8.2%
Other
5.1%
USD in 000s; SBGI based on 164 pro forma stations as of end of year 2014;
1
Includes EBITDA for acquisitions that have closed where available; GCI based on full year 2013, year end expectation given where available;
2
Includes stations operated under JSAs/SSAs/etc.;
3
TVHH Data is for
2013-2014 television season;
4
Only counts stations with a big 4 affiliate on secondary channel once Note: For SBGI station count includes satellites, while big 4 affiliation and top 25/50 market metrics exclude satellites. GCI pro forma numbers exclude KGWZ-LD, WBXN-CA, KTFT-LD; GCI
Includes A Flagstaff Satellite Station In Station Count But Doesn't Count It As In Measure Of Duopolies; NXST Includes Low Power and Satellite Stations, LIN & GTN excludes Satellite stations but includes low power (assuming they are not satellites); Generally the assumption is made that
coverage of a station equals total households or people in a DMA. Source: Company reports and press releases, RBC Capital Markets estimates
February 4, 2014 3

Summary Investment Highlights
The Local Broadcast TV Business Has Been Structurally Transformed by the Continuously
Upward Trajectory of Retransmission Consent: We believe that local broadcast station
retransmission consent, which currently stands ~$1/sub/month, is on a steady trajectory
approaching ~$2/sub some time in the next four to five years. According to SNL Kagan, the
broadcast industry will see an aggregate incremental revenue of nearly $4B over this period.
While some of this windfall will be redistributed back to the broadcast networks, providing
much of the primetime and sports content driving these fees, we believe the positive impact
on top line and margins of local station operators will be substantial. We are also not of the
opinion that this is a one-time revaluation of the broadcast signal for cable distribution. In
the context of content investment, the broadcast networks, which supply the local stations
with much of their content, invest far more than top general market cable channels and have
viewership levels that are far greater. The broadcasters also tend to have more “must have”
programming. As a result, we think there is continued room for expansion of retransmission
fees relative to typical cable affiliate fees.
Core TV Advertising Should Grow Low to Mid Singles over the Next Few Years, with
Political Advertising Boosting that Figure Further: According to MAGNA GLOBAL, local
broadcast TV advertising, including local and national spots, is still expected to grow 4.6%
excluding political over the next several years. Political advertising, where local TV dominates
in the advertising media landscape and is expected to do so for years to come, will typically
add approximately 1,000 bps of advertising growth every “even” year, when elections are
held in the United States. This political advertising is not entirely incremental, and we
assume a “displacement” factor of 50% is needed to adjust for general market advertising
that is pushed out. As a result, Y/Y comparisons that include political ads in even years, but
exclude it in odd years, offer a somewhat muddled view of underlying fundamentals. On a
two-year “stacked” basis (to comp political years against political years, and vice versa), we
would expect TV broadcast revenues for the industry to grow low to mid single digits.
In Broadcast TV, the Insatiable Desire for Scale Is Driving Consolidation: Scale is a key
element to getting greater negotiating leverage with multichannel video programming
distributors (MVPDs). The more reliant the distributor is on a given programmer’s content,
the greater the negotiating leverage that programmer will have in retransmission consent
negotiations. An MVPD simply cannot let a major operator “go dark” across the MVPD’s
footprint for competitive reasons. Further, scale is a powerful tool in negotiating reverse
compensation with the broadcast networks. This is because the loss of a major distribution
footprint for the networks has the potential to disrupt business, particularly the advertising
business. Negotiating dynamics have arguably affected the smaller station groups most
dramatically, as smaller station groups generally have the least leverage. Less leverage for
station owners is expected to result in both (1) lower retransmission consent payments from
distributors and (2) higher reverse compensation payments to the broadcast networks that
the stations are affiliated with. In addition to the benefits from scale, the ability to take
advantage of “as acquired” clauses in retransmission consent agreements, will also likely
continue to serve as a major driver for consolidation over the next several years.
Spectrum Assets Provide Monetization Opportunities and Offer Longer-term Optionality on
Use: Finally, local TV broadcasters will likely be given the opportunity to monetize their
spectrum. We continue to believe the FCC will likely commence a long anticipated broadcast
spectrum Incentive Auction sometime in 2015. We would expect at least a proposed if not
finalized FCC-sponsored spectrum auction and "repack" plan at some point during 2014,
which would provide a highly visible catalyst for potential value realization. We expect
spectrum value to vary based on local TV broadcasters, in addition to, potentially, a variety of
February 4, 2014 4

technical and regulatory factors. We have laid out a valuation framework for spectrum on
pages 26-30 of this report. We also believe that station operators will not face with an “all or
nothing” proposition. It may be possible to monetize some of a station’s spectrum while
retaining enough to continue to broadcast over the air. Today, it is possible for a station to
sell its spectrum and share spectrum with another station, which would allow both to
broadcast over the same band of spectrum. However, it may require a new standard to allow
both stations to broadcast in “full HD” at the same time—sports, in particular, demands
higher data usage than low-action content. Longer term, we think the direct use of spectrum
could be more valuable to broadcasters. Again, this would be especially true with the
potential for migration to a new digital broadcast standard (ATSC 3.0).
Reverse Compensation Creates Risk and Unknowns…But These Are Primarily Longer-term
Concerns: One of the biggest financial unknowns for local broadcasters is the longer-term
impact of reverse compensation on the financial model for broadcast network TV affiliates.
While the affiliates should continue to benefit from material step-ups in retransmission
consent over the next few years, the broadcast networks are fully aware of the monetization
local stations are realizing. Much of this monetization is generated on the basis of network
TV content, such as sports and primetime series, provided by the broadcast networks. Our
sense from the channels is that, ultimately, the networks will claim a share of the retrans
revenue stream in the range of 50-75% despite the likely protestations of local station
groups. We also believe that the larger the station group, the closer toward the lower end of
that 50-75% range the network’s share will be (and vice versa). That said, whatever risks exist
will likely take years to play out entirely, and as a result, we do not think investors have
enough information to incorporate them into the investment thesis yet. As we see some
players in the industry negotiate these deals, we will probably get a better sense of how the
dynamic plays out. However, if terms are not publicized, we will still need to wait for the
impact to show through in company financials before we really know the full impact.
Aereo Risk to the Retransmission Consent Revenue Stream Is Binary, Potentially Damaging,
but Unlikely: We do not view the Aereo service itself as a challenge to the broadcast
business model. However, we think the ability of the MVPD universe to co-opt the
technology for use as an end-run around retransmission consent revenue would be
detrimental to the business model. While the broadcast networks could convert to cable
networks, it is unclear what the fate of the network affiliates would be. The affiliates could
be wrapped into the network cable deals, creating a series of local cable networks. On the
other hand, the affiliates could simply be left out in the cold, forcing a reinvention of the
local broadcast TV business model with the stations shifting back to an ad-supported model.
A worst case for local station groups, where broadcast networks become cable channels
without local affiliates, presents significant downside risk to the core local broadcast TV
station business. However, we think such an outcome is unlikely (see previously published
notes
1
and our discussion in the section entitled Aereo – Loopholes, Litigation and Legislation
Could Impact the Retransmission Consent Paradigm for more details) and would take years.
Further, even if the Aereo model were to offer a retransmission consent “end-run,” it would
probably take years to implement as it would likely require new set-top box technology and
customer service support for MSOs to run parallel cable and Aereo-style solutions, as well as
the expiration of existing retransmission consent agreements with MSOs. We do not believe
the existing retransmission consent agreements with MSOs would be abrogated by a ruling
favorable for Aereo. Additionally, spectrum should offer valuation support in such a case.
1
Media Investors Should Get Ready for More Newsflow On Aereo Litigation (May 23, 2012), Our Call with a Legal
Expert on Aereo (July 19, 2012), and Aereo Implications Reach into the Cloud; Outcome Likely Favors Broadcasters
(January 13, 2014)
February 4, 2014 5

We think support of localism from some regulators and policy markers gives these parties a
vested interest in the viability of the broadcast model, since the existence of local TV stations
is important to disseminate everything from typical, everyday news to evacuation
information in case of emergencies. As a result, we suspect government intervention could
occur under circumstances where a technological innovation might dislocate the subscription
revenue stream for local broadcast TV. Further, our own regulatory channel sources have
indicated to us that Aereo-type technology might conform to the letter of the law but not to
the spirit of the law.
In other words, using one line of logic, Aereo may not be considered to be engaging in a
public performance under certain interpretations—specifically in the context of the
Cablevision DVR case where the 2nd Circuit determined a remote DVR service did not violate
copyright law. On the other hand, we believe the intention of the Copyright Act was to
capture such a system. A distinction can be drawn between Aereo’s point of view that public
performance should be determined based on the actual transmission, while the broadcasters
would argue the focus should be on the underlying work. Additionally, a legal Aereo, along
with any company that adopts similar technology, would then face the question of whether
or not it is an MVPD and subject to must-carry/retransmission consent rules. Further, a tie at
the Supreme Court level, certainly a possibility given Justice Alito’s potential recusal, would
result in each District Court ruling holding in each respective district. Given our belief that a
national solution is necessary to provide an “end-run” around retrans for most MSOs,
conflicting rulings at the District level could also be an “effective” win for the broadcasters.
In aggregate, we believe the broadcasters will eventually prevail from a business perspective.
That said, Aereo is in the midst of a number of legal proceedings with the broadcast industry
including a Supreme Court case, although all other outstanding litigation may be on hold
until the Supreme Court rules. A negative outcome at any stage, even though it might not be
a final determination of the ability for MVPDs to bypass retrans, could cause volatility in the
stock price.
Undoubtedly, there will be other technological innovations and the specter of regulatory
revisions from time to time in connection with an evolving media ecosystem. They too
should create headline noise as well as real, longer term potential for disruption. However,
we see the existing ecosystem as being fairly resilient for years to come.
February 4, 2014 6

Key Investment Themes
The State of the Industry Remains Robust
TV, generally, and local broadcasting maintain a strong position in the media ecosystem,
despite many noisy headlines.
Overall TV Viewership Is Strong
In the face of an increasingly fragmented media landscape that now includes online
entertainment and social platforms, TV viewership has been shockingly stable.
Exhibit 2: Live TV Viewership Has Been Roughly Stable over the Last Several Years
4:22 4:23 4:22 4:24 4:18
0:16 0:18 0:21 0:22 0:25
0:10 0:11 0:13 0:13 0:140:15 0:14 0:12 0:10 0:10
0:00
1:00
2:00
3:00
4:00
5:00
3Q2009 3Q2010 3Q2011 3Q2012 3Q2013
Live TV DVR Playback Video Games DVD Playback
Source: Nielsen, RBC Capital Markets
The TV Station Business Also Remains Surprisingly Robust
The station business saw significant declines in revenue and profits leading up to and
through the 2008 financial crisis. However, since bottoming in 2009, revenue and margins
have grown steadily, driven by three key factors:
1. Secular growth in retransmission consent revenues (see page 22 for more details)
2. A significant recovery in automotive advertising, and closely related automotive sales,
off a 2009 bottom (see page 16 for more details), and
3. To a lesser extent, strong growth in political advertising, one of the largest local
advertising categories during election years (see page 17 for more details).
February 4, 2014 7

Exhibit 3: Top and Bottom Line Trends Turned Positive for the TV Broadcast Sector Following the 2008 Financial Crisis
($3)
$0
$3
$6
$9
$12
$15
$18
$21
$24
$27
$30
$33
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Advertising Revenues Retransmission Fees Network-Compensation Fees
Reverse-Retransmission Payments Net Income
Units in $B
Source: SNL Kagan, Free Press research, RBC Capital Markets
We estimate that approximately 80% or more of TV station expenses are fixed costs, in the
short term. Additionally, we believe that roughly 100% of relatively new and quickly growing
retransmission consent revenues should flow through to EBIT. Because of the low variable
cost component in the TV station business, we would expect significant growth in top line to
offer strong growth in profits as well. This effect was seen over the past couple of years as
margins have trended upward since 2008/09. However, we note that certain factors may
result in realized incremental margins below 80%, such as growth in reverse compensation or
M&A related costs resulting from the aggressive acquisition environment over the past
several years. Further, a significant proportion of top line growth has been driven by
acquisitions, and while scale presents attractive margin opportunities, it should be obvious
that these businesses are not expected to be acquired at anything close to the fixed-cost
based incremental 80% margin.
February 4, 2014 8

Exhibit 4: As Revenues Have Grown Over the Past Several Years, So Have Margins
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (YTD
thru Q3)
Margin
OperatingRevenueForPublicStation
Groups($MM)
Total Operating Revenues ($ MM) Average Broadcast Cash Flow Margin
Remember, margins are
expected to be lower in odd
years, given significantly
lower political advertising
revenue
Note: As of 3Q13. Includes Belo Corp., Gray TV, LIN TV, Nexstar Broadcasting, Sinclair Broadcast Group, Inc
Source: SNL Kagan, RBC Capital Markets
TV’s position in the broader media ecosystem is surprisingly strong on both an absolute and
relative basis, despite an ecosystem that has seen years of fragmentation. On an absolute
basis, as demonstrated on page 7, live TV has held a relatively constant share of a person’s
day. On a relative basis, as we demonstrate below, the share of ad dollars spend on TV,
versus other media, aligns appropriately with the prevalence of TV in the consumer’s day.
TV Dominates Consumer’s Time and Advertiser’s Spending: The Ratio Between the Two
Suggests Limited Vulnerability to Ad Spend Moving away from TV
Compared to other media, the share of time consumers spend watching TV roughly equals
the share of media ad spend allocated to TV. While we would not argue with the assertion
that the share of advertising spent on digital will likely increase, we believe that the most
vulnerable forms of media are those that have a higher share of total ad dollars than time
spent, such as print.
Exhibit 5: TV’s Share of Consumer Time and Advertising Expenditure Are Roughly Even
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Radio Print TV Online + Other
Digital
Mobile (nonvoice) Other
Shareof…
Time Spent Ad Dollars
Source: emarketer, RBC Capital Markets
TV Is Still the Primary Source of News for Americans
On an anecdotal basis, we have noticed that most investors appear skeptical that many
people are still “watching broadcast news.” These investors generally do not seem to see a
place in the ecosystem for broadcast news, considering the 24-hour news cycle and the
February 4, 2014 9

immediate and near-universal availability of more personalized news online. Given the
constant availability of other news sources, the scheduled nature of broadcast news doesn’t
appear to fit in an environment where news can break at any time.
In the instant gratification society we have arguably become, investors might doubt whether
people will watch news programming pre-scheduled for a limited number of hours during
the day. However, in our opinion, the data does not holistically support this assertion—with
more adults citing broadcast television as their primary source of news compared to other
forms of media.
Exhibit 6: Broadcast TV Remains the Dominant Primary News Source
Broadcast
Television,
37.4%
Cable News
Channels,
10.2%Radio, 6.0%
Newspapers,
10.1%
Internet, 17.2%
Public TV, 7.2%
Mobile, 1.6%
No Primary
Source, 10.4%
Note: Share Of P18+, Data from TVB TV Basics Report last updated June 2012 (TVB Media Comparisons Study 2012. Knowledge Networks Inc. Custom
Survey.)
Source: tvb.org, RBC Capital Markets
Local News Is a Key Contributor to Station Revenue
Within broadcast television, local broadcast stations are the primary source of news for more
adults than the major broadcast networks. And, even broken out from the major broadcast
networks, local broadcast stations are more frequently the primary source of news for
Americans than cable news channels.
February 4, 2014 10

Exhibit 7: Local Broadcast Stations Remain the Primary Source of News When Compared to
the Major Broadcast Networks and Cable News Channels
Major
Broadcast
Networks,
17.7%
Local Broadcast
Stations, 19.7%
Cable News
Channels,
10.2%
Radio, 6.0%
Newspapers,
10.1%
Internet, 17.2%
Public TV, 7.2%
Mobile, 1.6%
No Primary
Source, 10.4%
Survey)
Exhibit 8: Local Broadcast Stations Also Reach a Larger Percentage of Americans than the
Major Broadcast Networks and Cable News Channels
Percent Of Americans Reached
71%
65%
38%
Local TV News Network TV News Cable TV News
Note: Based on February 2013 Nielsen data
Source: Pew Research Center (journalism.org), RBC Capital Markets
A significant proportion of local TV station revenue is generated by news programming. This
is likely not surprising given the importance of local broadcast TV news in the greater news
landscape. In fact, the contribution to revenue from news approached 50% in 2011, and has
risen over the last decade “along with the amount of news time stations air” according to the
Pew Research Center.
2
2
stateofthemedia.org
February 4, 2014 11

Exhibit 9: News Accounts for a Growing and Substantial Portion of Local TV Revenue
0%
10%
20%
30%
40%
50%
60%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
ShareOfLocalStationRevenue
Source: Research Center (stateofthemedia.org); original based on RTNDA/Hofstra University surveys of news directors at commercial TV stations, RBC
Capital Markets
It is, however, important to note that local news viewership has declined across the day in
recent years, and that trend continued in 2012. However, despite declining viewership when
we consider the more positive factors described above, we continue to think local broadcast
TV news has an important role to play in the consumer’s life, and thus, should continue to
receive a meaningful share of advertising dollars.
Exhibit 10: Local News Viewership Is Declining
0
5
10
15
20
25
30
2007 2008 2009 2010 2011 2012
LocalNewsViewership(MMofViewers)
Morning News Early Evening News Late News
Notes from original Pew Research Center chart: “Numbers represent ABC, CBS, Fox, and NBC affiliates. March 2009 ratings are not comparable to the
traditional winter sweeps period, February, and are not included here.”
Source: Pew Research Center (stateofthemedia.org); original based on Nielsen Media Research data, RBC Capital Markets
Local Stations Are Also an Important Source for Other Key Local Information
Beyond news, local broadcast TV stations are the primary source of a variety of other local
information, such as traffic, weather, and sports.
February 4, 2014 12

Exhibit 11: Local Broadcast Stations Are Also the Primary Source for a Variety of Other Local
Information
Primary Source For Local Weather, Traffic or Sports
Major
Broadcast
Networks,
14.6%
Local Broadcast
Stations, 35.1%
Cable News
Channels, 3.6%
Radio, 6.5%
Newspapers,
2.4%
Internet, 17.1%
Public TV, 6.7%
Mobile Device,
6.3%
Other/Don’t
Know, 7.7%
Survey.)
Local Stations Also Offer Competitive Pricing to Network
Spot TV pricing is competitive with Networks scatter, and according to TVB “the
competitiveness has improved year to year in the four key dayparts where [spot and network
scatter] go head-to-head: Early Morning, Early News, Prime and Late Night.”
3
In fact, the
aggregate price for a thousand viewers in each of the key overlapping dayparts is roughly
equal for spot TV and Network scatter.
However, we would be remiss not to note that replicating a national buy through spot
purchases is more complicated. What could be done with a single network scatter purchase
would take 210 separate transactions in the spot TV ad market. Additionally, if an advertiser
wished to only to focus on particular markets, it may have to pay a premium. For example,
advertising in only the top 10 markets may demand a double-digit CPM premium over
network scatter.
4
3
tvb.org
4
adweek.com
February 4, 2014 13

Exhibit 12: Spot Advertising Can Offer Attractive Pricing
$14.83
$19.37
$44.81
$17.47
$96.48
$22.11
$18.81
$37.06
$19.51
$97.49
Early Morning Early News Primetime Late Night Total 4 Dayparts
Network Scattervs. Spot TV CPM
DMA Network
A25-54
Note: Updated For 1Q14; Data from TVB Analysis of SQAD National and Local Market Cost Estimate Data
Overall Advertising Trends Remain Strong Too
The broadcasting business relies heavily on the local ad marketplace. Generally, we would
expect local advertisers to be more likely to aggressively pullback in a recession, and this was
certainly evident in local advertising in the late 2000s. Since 2009, local advertising has
largely stabilized, but it has yet to recover to previous levels.
While we would not argue against the theory that local advertisers are exposed to more
macro risk, we would also point out that industry expectations over the near term are
actually fairly favorable, with MAGNA GLOBAL estimating that local broadcast TV advertising
will grow 4.6%, excluding political advertising, over the next several years.
Ways Advertisers Buy Ads
 National (Network) Ads—
Purchases of advertising on
national networks (such as
the CBS or ABC Network—a
local station group would
not see these revenues).
 National Spot Ads—
Advertisers of “nationally
distributed” products
purchase advertising
through local stations and
buy across multiple markets.
 Local Spot Ads—Local
businesses buy advertising
directly from local stations
in a single market.
______________________
Source: Vogel, RBC Capital Markets
February 4, 2014 14

Exhibit 13: Local Ad Revenue Trends
CAGR 2009-15E
Local Cable TV (ex-political): 6.3% Local TV (ex-political): 4.7%
Local Broadcast TV (ex-political): 4.3% Local Media Advertising (ex-political): 0.1%
CAGR 2013-15E
Local Cable TV (ex-political): 4.7% Local TV (ex-political): 4.5%
Local Broadcast TV (ex-political): 4.4% Local Media Advertising (ex-political): 1.3%
2006A 2007A 2008A 2009A 2010A 2011A 2012A 2013E 2014E 2015E
Local Cable TV (ex-political) $4.0 bn $4.1 bn $3.8 bn $3.4 bn $3.9 bn $4.2 bn $4.4 bn $4.4 bn $4.6 bn $4.9 bn
Local Broadcast TV (ex-political) $17.3 bn $18.1 bn $16.2 bn $13.9 bn $15.0 bn $15.4 bn $15.9 bn $16.5 bn $17.1 bn $17.9 bn
Local TV (ex-political) $21.2 bn $22.2 bn $20.0 bn $17.3 bn $18.8 bn $19.6 bn $20.2 bn $20.9 bn $21.8 bn $22.8 bn
Local Media Advertising (ex-political) $97.2 bn $94.4 bn $82.5 bn $65.1 bn $66.0 bn $65.3 bn $64.8 bn $63.8 bn $63.9 bn $65.4 bn
YoY Growth - Local Cable TV (ex-political) 4.0% -7.6% -11.6% 14.1% 8.5% 4.1% 2.0% 4.4% 5.0%
YoY Growth - Local Broadcast TV (ex-political) 4.9% -10.6% -14.1% 7.7% 3.0% 2.7% 3.9% 4.1% 4.7%
YoY Growth - Local TV (ex-political) 4.7% -10.0% -13.6% 9.0% 4.2% 3.0% 3.5% 4.2% 4.8%
YoY Growth - Local Media Advertising (ex-political) -2.8% -12.6% -21.1% 1.4% -1.1% -0.8% -1.4% 0.2% 2.3%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
$0
$20
$40
$60
$80
$100
Growth
TotalU.S.AdRevenue(B)
Source: Magna Global, RBC Capital Markets estimates
Automotive advertising is a significant contributor to net time sales. At one station group,
Sinclair, automotive advertising provided approximately 21% of advertising in 2012. During
election years, political advertising is also a major contributor to revenue. Again using Sinclair
as an example, in 2012 political advertising was responsible for 14% of total advertising
revenue. Additionally, services, schools, retail, fast food, and paid programming are also
meaningful contributors.
Exhibit 14: Contribution to Total Net Time Sales at a Local Station Group (SBGI)
Automotive
21%
Political
14%
Services
14%
Schools
6%
Retail/Depa
rtment
stores
5%
Other*
40%
2012
Automotive
21%
Services
16%
Schools
9%
Retail/Depa
rtment
stores
5%
Fast Food
7%
Paid
programmi
ng
5%
Other*
37%
2011
*Other includes all categories for which the contribution to net time sales during the period was less than 5%
Source: Company reports, RBC Capital Markets
February 4, 2014 15

In recent years, total automotive ad spending in the US has grown considerably—from a
2009 low of roughly $12B to an estimate of $16.6B in 2013E.
Exhibit 15: US Automotive Ad Spending
$18.4B
$20.5B$21.0B
$19.8B
$18.5B
$15.6B
$12.0B
$14.2B
$15.3B
$16.1B$16.6B
12%
2%
-6% -6%
-16%
-23%
18%
7% 6%
3%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
$0.0B
$5.0B
$10.0B
$15.0B
$20.0B
$25.0B
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E
Growth
AdSpending
16.716.917.016.616.2
13.2
10.4
11.6
12.8
14.5
15.6
0MM
4MM
8MM
12MM
16MM
20MM
2003 2005 2007 2009 2011 2013
VehicleSales
Source: Kantar, TNS, AdAge Datacenter, Autodata, RBC Capital Markets estimates
Specifically, in the local broadcast station marketplace, an even more extreme drop-off in
2009 was evident followed by a significant recovery over the past several years.
Exhibit 16: US Automotive and Dealer Spending in the Spot Ad Market
$5.2bn
$4.8bn
$5.1bn
$4.6bn
$3.7bn
$2.3bn
$3.4bn $3.5bn
$4.1bn
-7.7%
6.1%
-9.1%
-19.2%
-39.7%
51.5%
3.5%
16.6%
-60%
-40%
-20%
0%
20%
40%
60%
$0bn
$1bn
$2bn
$3bn
$4bn
$5bn
$6bn
2004 2005 2006 2007 2008 2009 2010 2011 2012
Growth
AdSpending
Source: Kantar, tvb.org, RBC Capital Markets
Additionally, political ad spending has grown considerably in recent years, and we expect it
to continue to do so, although the rate of growth is expected to decelerate somewhat,
generally. It is also worth noting that growth in mid-term years is typically lower than in
years with a presidential election.
February 4, 2014 16

Exhibit 17: Local TV Political Advertising
-15%
-10%
-5%
0%
5%
10%
15%
20%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2006A 2007A 2008A 2009A 2010A 2011A 2012A 2013E 2014E 2015E
Growth
U.S.AdRevenue(bn)
Local Broadcast and Local Cable TV Political Advertising 2 Year CAGR - Local Broadcast and Local Cable TV Political Advertising
2010-2014E CAGR for Local
Broadcast and Local Cable TV
Political Advertising: 9.5%
Source: Magna Global, RBC Capital Markets estimates
Consolidation Has Been Rampant
Several key factors have driven significant and rapid industry consolidation including:
1. the ability to drive retransmission consent revenue growth from the core value
proposition; i.e., quality and popularity of programming relative to cable channels, and
from increased leverage for larger station groups,
2. the ability to realize “automatic” step-ups in retransmission consent payment rates
following an acquisition due to the presence of “as acquired” clauses in many existing
retransmission consent agreements, and
3. relatively healthy fundamental advertising trends.
A number of major transactions were announced in 2013. Some of the most notable
transactions are Meredith’s acquisition of three stations from Gannett, Sinclair’s acquisition
of Allbritton, Gannett’s acquisition of Belo, and Media General’s acquisition of Young
Broadcasting. That said, there are many other significant deals that were announced in 2013
and in the prior several years.
February 4, 2014 17

Exhibit 18: Transaction Comps
Release
Date
Closing
Date Buyer Seller
Deal Value
($ mil.)
Full Power
Stations
Class-A
Stations
Low Power
Stations
Avg. Broadcast
Cash Flow Multiple
23-Dec-13 Meredith Corporation Gannett Co.; Sander Media LLC 177 1 8.5x
23-Dec-13 Meredith Corporation Gannett Co.; Sander Media LLC 231 2 7.6x
19-Dec-13 Nexstar Broadcasting Group, Inc. Gray Television, Inc. 34 4 1 7.2x
20-Nov-13 Gray Television Inc.; Excalibur Broadcasting LLC Hoak Media LLC; Parker Broadcasting Inc. 335 19 1 9.8x
06-Nov-13 Nexstar Broadcasting Group, Inc. Grant Company Inc. 88 7 6.9x
25-Sep-13 Sinclair Broadcast Group, Inc. CP Media, LLC 90 7 1 8.9x
16-Sep-13 Nexstar Broadcasting Group, Inc. Citadel Communications, LLC 88 3 10.0x
29-Jul-13 Sinclair Broadcast Group, Inc. Allbritton Communications Company 975 8 2 10.0x
01-Jul-13 27-Dec-13 Tribune Company Oak Hill Capital Partners, L.P. 2,725 20 14 9.7x
17-Jun-13 Landover 5 LLC Mako Communications LLC et al. 46 5 40
13-Jun-13 23-Dec-13 Gannett Co., Inc. Belo Corp. 2,215 20 1 16 8.1x
12-Jun-13 Sander Media LLC Belo Corp. 102 6 16
06-Jun-13 12-Nov-13 Media General, Inc. Young Broadcasting LLC 685 16 7.9x
04-Jun-13 03-Oct-13 Sinclair Broadcast Group, Inc. TTBG, LLC 115 6 2 7.9x
24-Apr-13
Nexstar Broadcasting Group; Mission
Broadcasting Inc.
Communications Corp of America; White Knight
Broadcasting Inc. 270 14 2 6 7.9x
11-Apr-13 08-Aug-13 Sinclair Broadcast Group, Inc. Fisher Communications, Inc. 301 16 5 6 8.0x
28-Feb-13 22-Nov-13 Sinclair Broadcast Group, Inc. Barrington Broadcasting Group, LLC 370 22 2 7.2x
25-Feb-13 01-May-13 Sinclair Broadcast Group, Inc. Cox Enterprises, Inc. 99 5 6.6x
12-Feb-13 19-Mar-13 Comcast Corporation General Electric Company 1,793 25 1 2 8.6x
12-Feb-13 01-Jul-13 NRJ Holdings, LLC Local Media TV Holdings, LLC 59 2
12-Feb-13 12-Feb-13 Comcast Corporation LIN TV Corp. 602
03-Dec-12 01-Dec-12 Sinclair Broadcast Group, Inc. Newport Television LLC 54 1 8.4x
05-Nov-12 01-Feb-13 Nexstar Broadcasting Group, Inc. Newport Television LLC 35 2 1
04-Sep-12 06-Dec-12 Journal Communications, Inc. Landmark Media Enterprises, LLC 215 1 10.6x
19-Aug-12 01-Jan-13 Mission Broadcasting, Inc. Newport Television LLC 60 2 8.5x
09-Aug-12 30-Nov-12 Sinclair Broadcast Group, Inc. Bay Television, Inc. 40 1 8.2x
19-Jul-12 01-Dec-12 Nexstar Broadcasting Group, Inc. Newport Television LLC 226 9 1 3 9.0x
19-Jul-12 01-Dec-12 Sinclair Broadcast Group, Inc. Newport Television LLC 413 8 9.8x
19-Jul-12 03-Dec-12 Cox Enterprises, Inc. Newport Television LLC 235 4 8.5x
07-May-12 12-Oct-12 LIN TV Corp. New Vision Television, LLC 342 15 1 4 9.7x
02-Apr-12 10-Aug-12 NRJ Holdings, LLC International Media Group, Inc. 45 2 1
12-Dec-11 30-Mar-12 CBS Corporation WLNY Holdings, Inc. 55 1
02-Nov-11 01-Apr-12 Sinclair Broadcast Group, Inc. Freedom Communications, Inc. 385 8 8.7x
03-Oct-11 30-Dec-11 E. W. Scripps Company McGraw-Hill Companies, Inc. 212 4 5 10.0x
27-Sep-11 19-Jan-12 NRJ Holdings, LLC WTVE-TV Associates, LLC 30 1
08-Sep-11 01-Jan-12 Sinclair Broadcast Group, Inc. Cerberus Capital Management, L.P. 200 5 2 8.5x
26-Jan-11 01-Jul-11 Meruelo Group NBC Universal, Inc. 40 1 2
03-Jan-11 05-Apr-11 Southeastern Media Acquisition, Inc. Community Newspaper Holdings, Inc. 74 4
Source: SNL Kagan, RBC Capital Markets
“Super Group” Formation and Implications
The local broadcast TV station industry is relatively concentrated. According to Free Press,
“thirteen companies control 85 percent of the ABC, CBS, FOX and NBC stations in the
nation’s 25 largest media markets *while+ ten companies control 55 percent of all local TV
advertising revenues.”
5
While consolidation is not a new phenomena within the local
broadcast TV industry, in the past “consolidation generally involved the national networks
buying the major affiliates in the largest markets,” while in the past several years the
aggressive acquirers have been non-owned and operated station groups, largely focused on
“small and medium-sized markets.”
6
Aggressive acquisitions by these non-owned and
operated station groups have formed so-called “super groups”.
5
Turner, S. Derek. Cease to Resist: How the FCC’s Failure to Enforce Its Rules Created a New Wave of Media
Consolidation. Free Press. October 2013
6
Turner, S. Derek. Cease to Resist: How the FCC’s Failure to Enforce Its Rules Created a New Wave of Media
Consolidation. Free Press. October 2013
February 4, 2014 18

For an idea of scale, since the beginning of 2011, five “super groups”—Sinclair, Gannett,
Media General, Nexstar and Tribune—have announced approximately $10B in total
combined acquisitions, according to SNL Kagan and based on our calculations.
Exhibit 19: Deal Volume Has Accelerated Substantially in Recent Years
Total Value of Full Power Station Acquisitions ($B)
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
$16.0
1992 1995 1998 2001 2004 2007 2010 8/23/13
TotalFullPowerTVSales($B)
Total Number of Full Power Stations Acquired
0
50
100
150
200
250
2002 2004 2006 2008 2010 2012
Notes provided by Free Press—For Broadcast TV Deals: Values “Values exclude construction permits, partials, debt for equity swaps, recapitalization and restructuring (e.g., Tribune’s 2007 restructuring is not
included in the total). 2013 values include deals through Aug. 23.”; For Broadcast TV Deals: Full-Power Stations: “Values exclude recapitalization and restructuring (e.g., Tribune’s 2007 restructuring is not included
in the total). 2013 values include deals through Aug. 23.”
Source: Free Press (original based on SNL Kagan and Free Press research), RBC Capital Markets
Some of the largest groups have national reach that meets or exceeds that of the O&Os of
the major broadcast networks. For example, Sinclair reaches 39% of TV households and
Nexstar reaches 16% of TV households. For comparison, CBS’s O&O stations reach 38% of
the country, while ABC only reaches 23%. That said, for the local station groups, such as
Sinclair, the focus of the “big 4” station footprint is largely outside the largest markets. Reach
for additional groups is presented below.
Exhibit 20: Household Coverage
39%
44%
30%
14% 16%
0%
10%
20%
30%
40%
50%
60%
Sinclair Tribune Gannett Media General Nexstar
"Super Group" Reach
23%
38% 37% 36%
23%
32%
37%
27%
0%
10%
20%
30%
40%
50%
60%
ABC CBS FOX NBC
Network O&O Reach
All Stations
Primary Network Affiliates
Note: “Super Group” reach based on pro forma estimates presented in Exhibit 1, please see Exhibit 1 for details on assumptions. Network O&O reach based on the most recent annual filing for the respective
company. For NBC assumed total NBC affiliated TV station reach equaled sum of individual markets and added in Nielsen household reach for DMAs where NBC owned a Telemundo station but not a NBC station.
For CBS subtracted out household reach from total company coverage has provided in each DMA where CBS had a presence not through a CBS Network station. For FOXA assumed sum of percent of households
reached for each market as provided in the K equaled total FOX station coverage, FOXA appears to have a FOX Network affiliated station in every market where it has an O&O presence.
Source: Company reports and press releases, Nielsen/, RBC Capital Markets estimates
Beyond the three key drivers of consolidation outlined above, we believe another industry
dynamic has been responsible for the urgency with which station groups have consolidated:
reverse compensation. Growing retransmission consent revenues have not gone unnoticed
by the broadcast network partners, and the broadcast networks have looked to capture their
share of this value creation. We believe that smaller station groups are generally the most
February 4, 2014 19

weakly positioned in negotiations with both MVPDs and their broadcast network partners.
This lack of leverage could result in smaller groups realizing a significantly smaller level of
retransmission consent “profits,”
7
than a larger group would generate from the same station.
In late 2012, Perry Sook, chairman, president and CEO of Nexstar, described his vision for the
future of the broadcast station industry in an environment where leverage is incredibly
important:
I would think within two to five years, you'll see the emergence of what I
call three or four super-groups, and I think you'll see a couple emerge
sooner rather than later…. Those companies will continue to drive the
business, while the companies that are sub-scale will look in the mirror and
choose not to be a house by the side of the road as the parade passes by.
8
We have certainly seen the industry continue to move in this direction since the end of 2012,
and we do not see competitive dynamics that put larger groups at a significant advantage to
their smaller counterparts from going away.
Consolidation Could Be Limited by Regulatory Factors, but Workarounds May Be Available.
National household coverage is limited to 39%, and many of the larger station groups are
near or approaching this limit. Additionally, local ownership of multiple stations in a single
DMA is restricted.
Historically, regulatory policies have made these caps “soft”. First, coverage through UHF
stations currently only counts 50% towards the national ownership cap, meaning a station
group holding only UHF stations could have coverage reaching 78% of TV households.
Second, TV broadcasters do not need to consolidate directly. We think broadcasters could
use outsourcing arrangements, such as JSAs or SSAs, to expand nationally without having the
stations considered in the national or local ownership caps. JSAs and SSAs (defined in the
side bar) are not “attributable” to ownership limits (on the other hand, LMAs are
“attributable” if the owner of one station “programs more than 15% of another… in the same
market”).
9
While these structures are less efficient than outright ownership, we think
economic leakage is minimal.
However, we think regulatory policies that allowed workarounds of ownership restrictions
could, but they will not necessarily be eliminated. The FCC recently issued a Notice of
Proposed Rulemaking considering an elimination of the discount for UHF stations
10
and
consideration of whether or not to make JSAs/SSAs attributable (i.e. to count them in regards
to ownership limits) continues
11
. Furthermore, the NPRM’s proposal regarding the UHF cap
indicates that only combinations that resulted in a group exceeding the National Ownership
Cap that already existed, had approval from the FCC, or an application pending, would be
grandfathered—essentially putting a temporary hold on any new deals that would cross this
threshold.
7
We refer to the net between retransmission consent revenues received and reverse compensation payments made
as retransmission consent “profits”
8
broadcastingcable.com
9
SBGI 2012 10K
10
FCC 13-123
11
Local Marketing Agreement
(LMA): An arrangement where a
company provides “programming
services”* to the owner of a
station. For example, a station
group could buy a block of time on
a station it does not own, program
the station during that time period,
and sell the ads.
Joint Sales Agreements
(JSAs)/Shared Service Agreements
(SSAs): An arrangement to provide
“non-programming related”
services such as “sales, operational
and administrative services.”*
______________________
Sources:* SBGI 2012 10-K,
An outsourcing agreement may
allow the operator to act as if they
are the station owner in many
respects including, in some cases,
negotiating retransmission
consent.
February 4, 2014 20

Our sense is that the UHF discount will be eliminated, but that outsourcing agreements will
probably persist in some form, but not necessarily the same, allowing workarounds of
national and local ownership restrictions. If the UHF discount is eliminated and the cap is
effectively set at 39%, future consolidation opportunities for some of the larger groups may
be limited. However, we are uncertain of the final cap. We do note that the cap could be
raised given additional competition to broadcasters from new sources (e.g. Internet) and as a
concession to broadcasters who would oppose the elimination of the UHF discount.
Additionally, outsourcing agreements may continue to be available as a workaround. Under
such a scheme, we think even relatively large groups may have an opportunity for continued
growth in existing markets. On the other hand, even if regulatory restrictions were lifted, the
opportunities to expand into the largest markets, at least as a “Big 4” affiliate, are probably
limited because the broadcast networks typically own their stations in these markets.
Eventual Regulatory Outcome Uncertain But Under Most Scenarios, Opportunities Still Likely
Exist For Even The Larger Groups. There remains uncertainty regarding where the true limits
on ownership will eventually settle. While the UHF discount could be eliminated and/or
JSAs/SSAs could be made attributable, the overall cap could also be raised.
Additionally, for groups that have exhausted their ability to expand national reach, there may
be opportunities to expand within existing markets, which would offer unique scale
advantages such as sharing a news department. FCC rules generally permit owning two
stations if "at least one of the stations is not ranked among the top four stations in the DMA
(based on market share), and at least eight independently owned TV stations would remain
in the market after the proposed combination."
12
Further, “a party may request a waiver of
the rule to acquire a second or third station in the market if the station to be acquired is
economically distressed or not yet constructed and there is no party who does not own a
local television station who would purchase the station for a reasonable price.”
13
With JSAs/SSAs not currently counted toward local ownership, station groups have the ability
to capture at least some of the synergies associated with having a duopoly, even if the
requirements for ownership of multiple stations are not met. However, there have been
cases where the use of such a structure did not appear sufficient to permit ownership or
divestiture if the asset was chosen “in the interest of time”. For example, press reports
indicated that the Justice Department opposed or was not yet “comfortable” with the sale of
WSYT to Cunningham.
14
As a second example, the Justice Department recently forced the
divestiture of KMOV in St. Louis to a non-affiliated third party as a condition for completion
of the Gannett/Belo merger. If the divestiture had not been forced, the group would have
owned the top two stations in the market—we think this type of scenario is one where the
Justice Department would be more likely to get involved.
15
Additionally, some press reports
have indicated the FCC is taking a closer look at such agreements, and that decisions could
be delayed as this is done.
16
We do not think it is necessarily realistic to think that a station group could achieve
duopolies in every market where it owns a station. The company may not want an
independent, non-Big 4 station, and the holders of the current affiliate relationships may not
be willing to sell at an attractive price (nor may the owners of any independents, for that
matter). However, we think it is possible that, over time, station groups could swap stations
12
fcc.gov; also permitted if "the service areas – known as “Grade B signal contours” – of the stations do not overlap"
13
SBGI 2012 10-K
14
wsj.com
15
dealbook.nytimes.com
16
Two items from tvnewscheck.com: January 10, 2014 and January 23, 2014.
Existing Ownership Restriction
Highlights
 Local Radio/TV Cross
Ownership: Ownership limits
“based on a sliding scale that
varies by the size of the
market”. At the high end: if
there are 20 or more
“independently owned… full
power TV stations and radio
stations, major newspapers,
and the cable system in the
market… an entity can own up
to two TV stations and six radio
stations (or one TV station and
seven radio stations).”
 Local TV Multiple Ownership: A
group can own two stations in a
DMA if “1) the service areas…
do not overlap; or 2) at least
one of the stations is not
ranked among the top four
stations in the DMA (based on
market share), and at least
eight independently owned TV
stations would remain in the
market after the proposed
combination. “
 National TV Ownership: A group
can cover up to 39% of
households, “under this rule, TV
stations on UHF channels (14
and above) count less than TV
stations on VHF channels (13
and below).”
____________________
fcc.gov/guides/review-broadcast-
ownership-rules
February 4, 2014 21

so that each group gives up a single station to create a duopoly in another market—or affect
multiple transactions to achieve a similar effect.
Local Efficiencies, Purchase Synergies, and Benefits of Scale
Within a single market, a TV broadcaster may be able to expand margins through localized
economies of scale. While there are local ownership restrictions that must be considered,
discussed above, operating two stations versus one in a single market can offer meaningful
synergies. This scale can be achieved either by owning two stations in a market outright
(which is attributable), effectively through an LMA (which we assume is generally
attributable), or through an outsourcing agreement SSA/JSA (which we assume is generally
not attributable, though this assumes certain conditions are met).
Synergies from the creation of a duopoly come from “marketing, programming, overhead
and capital expenditures.”
17
For example, one estimate of potential cost savings from the
creation of a duopoly is presented below for the Yuma-El Centro DMA.
Exhibit 21: Example of Estimated Cost Savings from Creation of a Duopoly
Potential Cost Savings From Creation Of A Duopoly In Yuma-El Centro DMA
$1,000,000
$75,000
$618,000
$55,000
$247,000
$0
$250,000
$500,000
$750,000
$1,000,000
Combining CAPEX Combine Facilities
(rent/utilities)
Share Technical
Operations
Employees (e.g.
engineering, news
production staff)
Share Joint Sales
Staff
Share
Administration
Personnel
Total Annual
Source: FCC Filings, RBC Capital Markets
An acquisition of another group may result in cost savings/purchase synergies above the
station level through the elimination of redundant functions such as corporate overhead. We
can look at larger acquisition to get a sense of achievable cost synergies. For example, when
announcing the acquisition of CCA and White Knight Broadcasting, Nexstar management
cited synergies of $12.5 million on an incremental revenue base of approximately $100
million, and further noted that the “majority” of synergies are from cost savings.
18
This
transaction resulted in the creation of two new duopolies (19 stations acquired in total).
Retransmission Consent: Capturing Underlying Content Value
and Leveraging “As Acquired” Clauses
Some station groups negotiated “as acquired” clauses in their existing retransmission
consent agreements. The qualifications to be covered under “as acquired” clauses vary by
17
SBGI 2012 10-K
18
Company reports, conference call
February 4, 2014 22

contract, and in some cases may include stations operated under LMAs or other outsourcing
arrangements, such as SSAs and JSAs, while in other cases they may not be included.
These agreements state that the acquiring station group is able to “step-up” the retrans rate
of any station it has acquired to its existing rate with the distributor (MSO, satellite or telco).
As a result, there is effectively a gap between the forward-looking revenues of the company
the seller is divesting and the company the buyer is acquiring. This offers synergies beyond
the more typical sources: scale and back office savings. Even if the opportunities for national
coverage expansion have been largely exhausted by a station group, there may still exist
some opportunity for acquisitions to be used to realize “as acquired” step-ups in markets
where the group already owns one station—although regulatory decisions could potentially
either increase or decrease possible acquisition opportunities. Exhibit 23 demonstrates the
possible step-up seen in a sample acquisition. We would generally expect the gap in per-sub
rates to be smaller when the acquired group is closer in size to the acquirer, since the
negotiating power of the two separate entities would likely be more similar than in cases
where the scale of the acquiree and acquirer differ greatly.
Exhibit 22: Hypothetical Example of “As Acquired” Clause Effect
Independent Under Larger Group
Acquired Subs 5.1 mm Acquired Subs 5.1 mm
Retrans Rate $0.70 Retrans Rate $0.87
Annual Retrans $43mm Annual Retrans $53mm
Retrans ∆ $10mm
Apply a new rate of: $0.87
Source: SNL Kagan, RBC Capital Markets estimates
Off of a nominal base, retransmission consent revenues have grown considerably over the
past several years, and we expect this growth to continue at a double-digit pace as rates
catch-up to fair value (justified by highly rated primetime programming, important local
news, and sports content that provides the consumer “rabidity factor” for the channel).
Exhibit 23: Estimated Industry Retransmission Consent Revenues Have Grown Considerably
$0.5 bn
$0.8 bn
$1.2 bn
$1.8 bn
$2.4 bn
$3.3 bn
$4.3 bn
$5.1 bn
$5.9 bn
$6.6 bn
$7.1 bn
$0.0 bn
$1.0 bn
$2.0 bn
$3.0 bn
$4.0 bn
$5.0 bn
$6.0 bn
$7.0 bn
$8.0 bn
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
IndustryRetransmissionRevenue
Source: SNL Kagan estimates, RBC Capital Markets
Timing of retransmission consent renewals can be important. In cases where a single MSO
makes up a large percent of the subscriber base, a meaningful step-up could drive materially
accelerating growth in a particular period.
When discussing the opportunity for growth from retransmission consent revenue, we would
be remiss to not mention the corresponding payment back to the broadcast network for
Retransmission Consent:
Retransmission consent
payments are fees paid from
MVPDs (e.g. Comcast), for the
right to show a local broadcast
station’s feed on its system.
For example, in Seattle,
DirecTV has to pay SBGI for the
right to include the local ABC
feed (KOMO) in its package.
Reverse Compensation:
Reverse compensation
payments are fees paid by a
local station group to a
broadcast network as part of
the affiliate agreement. For
example, SBGI has to pay ABC
for the right to show the ABC
Network’s national
programming feed on its local
station (includes the right to
sports, and premium
primetime content).
February 4, 2014 23

programming. These payments may be, but we believe generally are not, directly tied to
retransmission consent payments received. We expect these payments, known as reverse
compensation, to grow significantly over the longer term. However, many large industry
players should benefit near term from a long duration for many of its outstanding affiliate
agreements.
Spectrum: Opportunity, Asset, and a Floor
Before we proceed with a valuation of a station’s spectrum, we think it is important to stress
that we do not expect all station groups to participate as sellers in the upcoming spectrum
auction and reverse auction. However, we still think it makes sense to use the last 700MHz
spectrum auction as the starting point for estimating the value of spectrum because it
provides granular pricing by region, not available since. Additionally, we recognize that
parties that do not sell into an auction may be doing so because they believe the auction
undervalues their spectrum. While this may certainly be true, maximizing self-monetization
beyond the traditional broadcast business may rely ‘ancillary services’/broadcast overlay.
Given uncertainty around and importance of a new standard for fully realizing the benefits of
‘ancillary services’ as well as the relative nascent stage of broadcast overlay, for our purposes
we focus on the more defined but potentially more conservative valuation provided from
prior transactions.
It is possible to broadcast the signal of a single TV channel over less than 6 MHz, which would
allow a broadcaster to partially monetize spectrum space through other services. However, it
is important to note that while a broadcaster could still provide a signal with only a portion
of its spectrum, it would either have to send a lower quality picture or fewer channels
(assuming no technological improvements are implemented). We do not believe that a
station would currently be able to broadcast a high definition (HD) signal for a wide range of
content with less than 50% of its spectrum—and high action events, such as sports, may
require 75% plus—under the current standard. The exhibit below shows how a broadcast
signal can be split between channels. In each case, the primary channel is being delivered as
an HD signal. Also, note that WRC of Washington DC is also sending a mobile TV signal.
In Exhibit 24 below, we
demonstrate how a single stick of
spectrum can be used to
broadcast multiple channels.
Under the current standard, 6MHz
of “space” in the spectrum allows
the transmission of roughly
18Mbps worth of data. A change in
the standard could allow the same
MHz of “space” in the spectrum to
transmit more data.
February 4, 2014 24

Exhibit 24: Usage of One Band of Spectrum to Deliver Multiple Channels
6MHz = 18Mbps
6MHz = 18Mbps
Primary Stream Of Non-
Sports Content (PBS show
"This Emotional Life") in
720p HD
Primary Stream Of Non-
Sports Content (PBS show
"This Emotional Life") in
Secondary Chan. (SD)
Tertiary Channel (SD)
Quarternary Channel (SD)
Secondary Channel (SD)
Primary Stream Of Sports
Content (NFL footballgame)
in 720p HD
Primary Stream Of Sports
Content (NFL footballgame)
in 1080i HD
Secondary Chan. (SD)
Mobile DTV
No Additional Channels
Source: FCC, RBC Capital Markets
Additionally, there are a couple of recent cases where local stations/groups appear to be
actively looking at channel sharing as a possible tool to facilitate spectrum monetization in a
potential auction. In LA, a PBS station and a multilingual station are testing spectrum sharing
in an experiment sponsored by CTIA-The Wireless Association—success could make it easier
for local channels to partially monetize their spectrum in a broadcast spectrum auction.
19
Additionally, recently LIN Media has indicated it would consider selling a portion of its
spectrum and participating in spectrum channel-sharing arrangements.
20
While station groups may be able to partially monetize their spectrum even if a change in
standard does not occur – to maximize monetization we think that a change in technical
standards is the key. The next major overhaul in the broadcasting standard is known as ATSC
3.0. While conversion is many years away, and not a guarantee, it would provide some
interesting opportunities. However, we would remind investors that many hurdles remain.
These hurdles include:
(1) determining the actual standard to be implemented (e.g. details of ATSC 3.0 are not yet
determined; target for a proposed standard is December 2015),
(2) gaining regulatory support from the FCC (which, given the expectation that such an
overhaul would require consumers to obtain new receivers/converters, may take time),
and
(3) actually switching over consumers (since ATSC 3.0 is not expected to be backward
compatible).
19
nytimes.com
20
While broadcasters can send a
mobile signal under the current
standard, it requires a second
feed—as the technical aspects of
the primary feed make mobile
reception impractical (e.g. fading
is a major issue when trying to
receive the current stationary
“TV” broadcast with a moving
device). However, with limited
space in the spectrum and little
consumer adoption, there is little
incentive for broadcasters to offer
such a stream. In turn, with only a
few mobile DTV feeds, there is
little incentive for manufacturers
to offer equipment able to receive
these feeds and little incentive for
consumers to push for the
technology. Further, we think a
mobile DTV stream under the
current standard would still have
more broadcasting issues than one
under a revised standard.
February 4, 2014 25

Remember, there was more than a decade between the FCC accepting a new standard and
finally fully adopting it for full power transmissions in the digital to analogue transition.
Although, we would note that digital streams were available earlier than the cutoff date
since broadcasters were temporarily given a second piece of spectrum on which to air the
new digital channel before the analogue channel went off the air.
A major change in standard would allow larger data throughput on a 6MHz band of
spectrum, in addition to utilizing compression technology that could send the same quality
picture using less data. With the proposal process still ongoing, the capabilities of ATSC 3.0
are undetermined. But, we think it would be possible to see as much as a doubling in data
throughput per 6MHz band (an increase of 30% is the minimum indicated in the ATSC call for
proposals) while the data required to send an HD quality signal could be reduced by more
than 50%. If such a standard were implemented, a single 6MHz stick could be divided to
transmit:
1. broadband data through roughly 25% of the spectrum space. This space could be sold to
mobile phone companies on a per MBit basis.
2. multiple HD channels, possibly seven, which could be received by in-home TVs and
mobile devices on the remaining spectrum. For mobile devices to receive broadcast
channels, the current standard requires a second stream be sent; however, we would
anticipate that channels under a new standard could be viewed on fixed and mobile
devices.
Exhibit 25: One Example of How Spectrum Could Be Monetized Beyond Current Use
Wholesale Broadband 7 HD Channels
0.0MHz
0.0MHz 1.5MHz 6.0MHz
CanSellBandwidthtoCellCos.ByBit
CanTelecastMultipleHDChannels
ToTVsAndMobileDevicesOver
RemainingSpectrumSpace
Source: Company Reports, RBC Capital Markets
Such a scenario would provide more channels for the station owner to program and an
opportunity to provide consumers a superior TV product (one receivable by mobile devices).
Simply having more pipes would provide a substantial opportunity. While MSOs are generally
opposed to adding any new networks, this would offer the capability to launch networks
straight to the consumer. While success of any new channel would depend largely on
programming, ownership of the pipe sets the stage. It is important to note, however, that
February 4, 2014 26

mobile devices will need to have the appropriate receivers installed; but we think that the
availability of all stations nationwide could help drive adoption. Once the new standard is in
place, all broadcast channels across the country would be available for the device to receive,
while in the case of prior mobile TV products, only channels that specifically offered the side-
stream were available and there was no guarantee that they would be available in the
future.
A change in standard may offer significant benefits to station groups, even in a scenario
where the company does not have nationwide coverage. With the existing channels
becoming mobile and potentially more plentiful, utility to consumers should increase. High
utility would likely increase viewership and thus ad revenues. Further, a change in standard
could greatly increase the potential for generating side-revenue from the wholesale of data
for mobile broadband. Additionally, two or more groups, in combination (through a strategic
partnership and not a “transaction”), could potentially reach as much as 70%-plus of the
country, fundamentally changing the utility of this spectrum. Such a partnership would set
the stage for the companies to have a national network of their own. Potentially, this would
both allow the launch of nearly national channels (allowing the group to compete more
directly with cable channels that have national reach) and allow the companies to offer the
wholesale of mobile broadband space nationwide.
Spectrum Value Derivation
Using the 2008 700Mhz Auction (Auction 73) as our basis for valuing spectrum, and assuming
no price inflation since that point (which we recognize may be a conservative assumption,) it
is possible to come up with an estimate of spectrum value by market. Details of the analysis
are presented below.
We believe the FCC Spectrum Auction 73 also known as the 700 MHz Band Auction (held in
March 2008) provides a reasonable historical precedent for the value of TV broadcast
spectrum on the open market. Spectrum sold in the auction averaged $1.28 per MHz-Pop,
although results varied significantly by geography.
21
For example, while spectrum in Chicago
garnered $3.76 per MHz-Pop, spectrum in Paducah, Kentucky and the surrounding area sold
for a mere $0.03 per MHz-Pop. Spectrum sold as part of an incentive auction would most
likely be located in the 600 MHz Band, and thus, we would expect it to be worth roughly the
same as the spectrum sold in the 700 MHz Band Auction (Auction 73) because the
characteristics of the spectrum should be similar.
Pricing also varied meaningfully by “block”; this determined how the spectrum was sold,
what spectrum was sold, and how it could be used. Each of these blocks, however, was part
of the UHF TV spectrum. In some ways, the cleanest block of spectrum was the C-block,
which was sold nationally or in large regions, depending on the nature of the bid. The C-block
offered a mobile provider a clean way to aggregate a single band across the country, which is
beneficial because equipment costs have historically been higher when a cell phone has to
receive more ranges of spectrum. However, we think it is possible that pricing could have
been depressed after a certain price was reached due to “open access” requirements—
although, up to this point, open access has not become widespread. Additionally, concerns of
interference for the A-block may have depressed pricing,
22
while requirements on the D-
block deterred purchasers. Finally, the E block was allocated as unpaired spectrum, 1-way
21
Remember MHz-Pop is range of spectrum times the number of people that you can reach with your spectrum. If
you own 6 MHz of spectrum in an area where 1,000 people live, you have 6,000 MHz-Pop of spectrum. It tells you
how much ―stuff‖ (information) you can send how many people in one metric.
22
nytimes.com
February 4, 2014 27

spectrum, which is generally considered less valuable.
23
This leaves the B-block as the
cleanest basis for a valuation of spectrum that is unencumbered by technical or regulatory
restrictions.
Exhibit 26: Value of Spectrum in the 2008 Auction Varied by Block
Average Price For All Spectrum Sold By Block
All A-Block Spectrum Sold All C-Block Spectrum Sold
Purchase Price
For All Blocks
Total MHz-Pop
Purchased $/Mhz/Pop
Purchase Price
For All Blocks
Total MHz-Pop
Purchased $/Mhz/Pop
$3,990mm 3,424mm $1.17 $4,747mm 5,704mm $0.83
All B-Block Spectrum Sold All E-Block Spectrum Sold
Purchase Price
For All Blocks
Total MHz-Pop
Purchased $/Mhz/Pop
Purchase Price
For All Blocks
Total MHz-Pop
Purchased $/Mhz/Pop
$9,105mm 3,453mm $2.64 $1,276mm 1,701mm $0.75
Price For Spectrum Sold That Can Be Identified To Roughly Match A DMA
A, B, E-Block Blend For Identified DMAs B-Block For Identified DMAs
Purchase Price
For All Blocks
Total MHz-Pop
Purchased $/Mhz/Pop
Purchase Price
For All Blocks
Total MHz-Pop
Purchased $/Mhz/Pop
$13,150mm 7,196mm $1.83 $7,939mm 2,273mm $3.49
Not a 1-to-1 comparison: The vNot a 1-to-1 comparison: The valuation above includes 6
Source: RBC Capital Markets
Our valuation of spectrum is based on the price of spectrum in the 2008 spectrum auction,
but a number of questions must be answered to determine if any adjustments need to be
made.
Should we include an inflation factor to capture an increase in value since the 2008 auction?
We would have anticipated that pricing would have increased since 2008. However, recent
transactions do not necessarily support this assertion—as we describe below. As a result, we
simply assume there was no general increase in broadcast TV spectrum pricing since the
2008 auction. Considering only a few major transactions since the 2008 auction, it is difficult
to make this estimate with much certainty.
While the price per MHz-pop for Qualcomm’s spectrum was higher when sold to AT&T than
when purchased, it is possible this is due to, or at least partially due to, the fact that
Qualcomm intended to use the spectrum as one-way spectrum. On the other hand, AT&T
announced it would pair the spectrum with another band—which we believe could increase
the value of the spectrum. Additionally, it is worth noting that these blocks are not
completely comparable because the D-block spectrum sold was not purchased in the 2008
auction, thus, we recommend some degree of conservatism in extrapolating from these
results.
Second, the sale of spectrum from Verizon Wireless to AT&T indicates roughly flat pricing
before factoring in the value of the inclusion of AWS licenses in five markets. Note that, news
reports indicate that not all of the B-Block spectrum purchased as part of the 2008 auction
was included in the sale, thus we do our best to estimate what regions were included.
Third, the Verizon/T-Mobile transaction is similar to the first transaction discussed. While
headline pricing suggests an increase in the value of spectrum, technical complications—in
this case progress in dealing with interference issues—makes the headline numbers more
difficult to interpret. In aggregate, we think it makes sense to not apply any inflation factor to
23
wirelessbroadbandcoalition.org
February 4, 2014 28

2008 auction results, although it wouldn’t particularly surprise us if there was some upside to
this assumption. We err on the side of conservatism given the limited availability and opaque
nature of comparable transaction data.
Exhibit 27: Major Transactions of 700MHz Spectrum since the 2008 Auction
Price Difference Between Auction And Recent Transactions
Auction Results Recent M&A
Date 12/20/10
Price ($mm) 838 Price ($mm) 1,925
Total MHz-Pop (mm) 2,122 Total MHz-Pop (mm) 2,220
Price ($/MHz-Pop) $0.39 Price ($/MHz-Pop) $0.87
Purchased By Qualcomm Sold To AT&T
Sold By Qualcomm
Details: Details:
Date 1/25/13
Price ($mm) 1,871 Price ($mm) 1,900
Total MHz-Pop (mm) 492 Total MHz-Pop (mm) 504
Purchased By Verizon Wireless Sold To AT&T
Sold By Verizon Wireless
Details: Details:
Date 1/6/14
Price ($mm) 2,417 Price ($mm) 3,315
Total MHz-Pop (mm) 1,651 Total MHz-Pop (mm) 1,792
Purchased By Verizon Wireless Sold To T-Mobile
Sold By Verizon Wireless
Details: Details:
Not a 1-to-1 comparison: The valuation above includes 6
MHz E-Block from 722MHz-728MHz (this spectrum was
purchased by Qualcomm in the 2008 auction), and a 6MHz
D-Block spectrum in location 716MHz-722MHz (this
spectrum was purchased for $38mm in 2003 and was
nationwide).
Not a 1-to-1 comparison: The valuation above includes 6
MHz E-Block from 722MHz-728MHz (this band was sold to
AT&T), and 60% (weighted for the 6MHz sold) of the
10MHz Nationwide in the D-Block in location 758MHz-
763MHz and 788MHz-793MHz purchased as part of the
auction.
Price does not include "a contribution of Advanced Wireless
Services (AWS) spectrum licenses in five markets."
Above we only include our estimate of the lots of B-block
spectrum were sold to AT&T . Some of the Verizon B-block
licenses purchased were not sold to AT&T.
Appears to suggest an increase in pricing but we note it's
possible FCC and technical changes that could help address
interference issues may have made the spectrum more
valuable. Pricing is still well below where B-block sold.
Purchase price combination of cash ($2.365B) and spectrum
swap ($0.95B; T-Mobile est).
Above we include identified A-Block Verizon purchases in
the 2008 spectrum auction excluding the Chicago block it
sold.
Source: Company reports and conference calls, fcc.gov, dailywireless.org, yahoo.com, RBC Capital Markets
What restrictions are placed on the spectrum and its sale?
The government’s support would be required for its full monetization, largely because the
FCC would need to implement a change in the broadcast standard. For broadcasters who
wish to sell spectrum through an auction, the money received may be impacted by any
restrictions on what bidders are allowed to participate or limits on how much spectrum a
player can acquire. While we think outright restrictions are unlikely, we think limits are
possible on how much sub-1 GHz spectrum Verizon and AT&T will be allowed to own.
Should B-licenses be used as the basis for spectrum value? Or should a blended valuation be
used for multiple blocks sold in a single DMA?
We believe a spectrum owner determined to sell their spectrum in the near-term should at
least consider the blended value of all blocks of spectrum when estimating potential realized
value, even though the B-block rate may still be the most comparable depending on the
February 4, 2014 29

circumstances. Given the uncertainty around regulatory restrictions and auction rules, it may
not be a fair assumption that spectrum sold in an upcoming auction would necessarily match
the rates of the most expensive block sold in the 2008 auction. However, for those in a
position to hold spectrum longer term to try to capture a larger portion of the spectrum
value, and not the value with potentially restrictive requirements on use, we think the B-
block serves as the best valuation template. Additionally, we note again that a direct sale of
the spectrum is not the only path to monetization—and players willing to pursue self-
monetization do not need to sell into an auction to realize the value of their spectrum.
We think using the B-block as the basis makes the most sense for parties not in a rush to
monetize spectrum, as: 1) the government likely cannot force a sale, meaning broadcasters
shouldn’t take a “bad” deal, and 2) a more flexible standard would offer the best of both
worlds and result in spectrum going to the most valuable use. Spectrum allocated to the
most valuable use could both increase value captured by the broadcasters and give the
government an outcome that results in spectrum allocated to its most efficient use. Further,
if taxed ratably, as a percentage of revenues generated, the most efficient allocation should
also maximize revenues generated for the government. However, we consider spectrum
values based on both the B-block and a cross-block blend below as we lay out the price of
spectrum by DMA to determine how price varies by market.
February 4, 2014 30

Exhibit 28: Model Based on Results of the 2008 700MHz Band Auction (Auction 73)
Price Based On B-Block
Price Based On Blended Blocks
y = -0.634ln(x) + 3.723
R² = 0.4733
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
0 50 100 150 200 250
$/(MHz-Pop)
Rank Of P2+ Of Closest DMA
y = -1.333ln(x) + 7.5821
R² = 0.5556
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
0 50 100 150 200 250
$/(MHz-Pop)
Rank Of P2+ Of Closest DMA
Source: FCC, RBC Capital Markets estimates
Because, as discussed above, we do not assume an inflation factor since the 2008 auction
in the baseline assumption, Exhibit 28 also serves as the template for the value of
spectrum held today.
Should stations operated under outsourcing agreements be included in spectrum valuation?
If the outsourcing agreements include rights to buy the licenses, and the ability to put these
rights to another party, then we think the operating group should be able to capture the
value of the spectrum of stations under outsourcing agreements. However, given the lack of
completely transparent information, we think both scenarios should be considered.
How much value is captured by the government?
While we do not believe the government could “take” the spectrum from any broadcasters—
it may take a share of proceeds from its sale (such as those generated by an auction) or tax
proceeds from “supplementary” services on broadcast spectrum (such as transmission of
mobile broadband data) as is currently done at a rate of 5%.
24
While this tax gives us some
context for estimating the government’s share of revenues from ‘supplementary’ services,
we recognize there is much uncertainty around the possible split of revenues in an auction.
24
transition.fcc.gov
February 4, 2014 31

Key Investor Concerns
Aereo – Loopholes, Litigation and Legislation Could Impact the
Retransmission Consent Paradigm
A key part of the broadcast television investment thesis is contingent upon the ability to
drive monetization higher over time, primarily through the retransmission consent
framework. There are, however, legal and legislative initiatives that could threaten the
existing framework for retransmission consent.
As further detailed in our pieces titled Media Investors Should Get Ready for More Newsflow
on Aereo Litigation (May 23, 2012), Our Call with a Legal Expert on Aereo (July 19, 2012), and
Aereo Implications Reach into the Cloud; Outcome Likely Favors Broadcasters (January 13,
2014), one of the biggest potential investor issues surrounding the future of retransmission
consent revenues is the potential viability of start-up Aereo TV. The subscription service was
launched in March 2012 and provides consumers with the ability to watch broadcast TV
online for a subscription fee of $8/month. Aereo appears to be well funded and is backed by
Barry Diller, the chairman of IAC/InterActiveCorp, which likely adds some weight to its
efforts. IAC/InterActiveCorp reportedly led two rounds of investments in the company (for
$20.5 million and $38 million). Aereo has argued that it is not an MVPD in the traditional
sense, and not engaging in a public performance of the content it streams, but rather it is an
antenna rental service, and thus, is not required to pay retransmission consent fees.
The service works as follows:
1) Each subscriber is provided his or her own thumbnail size antenna at an off-site location
that picks up an individual broadcast signal just for that user;
2) The antenna and related services are controlled remotely by the end user;
3) The desired/selected signal is encoded and uploaded to the Internet; and
4) The end user can stream a live signal online from his or her computer, mobile device, or
tablet. Additionally, the service includes DVR functions to record content and play it back
later.
Broadcasters brought litigation against the company, and another similar company called
FilmOn, claiming copyright infringement (and in some cases unfair competition, a claim
which has since been dismissed). In the lower federal District “trial courts” of Boston and
New York, Aereo has been victorious in early litigation, with the broadcasters being denied a
pre-trial injunction against Aereo that would have forced cessation of its service “in-market”.
However, in the LA and Washington DC trial courts, FilmOn lost that same battle. Given that
the courts appear to be treating Aereo and FilmOn as a single legal “issue”, our assessment is
that Aereo (and the class of antenna rental companies) is essentially two for four in the lower
courts.
That said, in April 2013, Aereo won a 2nd US Circuit Court of Appeals—the appellate level of
the New York trial court—ruling that denied broadcasters a preliminary injunction against
the service. This appellate level “win” for Aereo is probably the most significant legal ruling in
the proceeding since it is the highest court ruling. That said, we believe the 2nd Circuit ruling
could be something of an outlier in that the Court was bound by the 2nd Circuit's ruling on
the 2008 Cablevision remote DVR case (no other jurisdiction is). In the remote DVR case,
Cablevision successfully defended itself against Viacom for establishing a remote-based DVR
service in which the cable subscriber’s DVR “box” was essentially a cloud based “virtual” box
that did not sit at the customer premise, and was only accessible by the individual customer.
If the service is only available to a single paying subscriber for an individual performance,
Why We Are Comfortable with the
Aereo Risk
Each battle has a varying likelihood
of success, but in aggregate, losing
the war would take a lot. In order
for Aereo to impact the business
case, we think the following would
have to happen:
 Aereo Would Have to Win the
Supreme Court Copyright Case:
The case is not clear cut, some of
our best industry contacts
indicating 60/40 for the
Broadcasters.
 Even a 4-4 Tie Likely Would Not
Be Sufficient to Impact the
Business Case: Would result in
each District Court ruling holding
in each respective district. We
believe a national solution is
necessary to provide an “end-
run” around retrans for most
MSOs. Conflicting rulings at the
District level could be an
“effective” win for broadcasters.
 Aereo Would then Have to Find
a Way to Avoid Classification as
an MVPD and Associated Retrans
Requirements: Again not a clear-
cut issue. In our opinion, the
definition of an MVPD would
warrant considering Aereo one,
but thus far it is our sense that
the FCC has been reluctant to
regulate online video (with
questions also relating to
whether or not an MVPD must be
facilities-based.
 For Aereo to Offer an “End-Run”
Around Retrans for Existing
MVPDs, It Would then Have to
Find a Way to Adopt the
Technology While Avoiding the
Requirement of Retrans
Payments: While a work-around
may certainly be possible, it is
unclear what would be required
for an MVPD to be able to offer
the service as part of its package
without retransmission consent
requirements then applying.
February 4, 2014 32

then its location at the customer premise on a physical, or remote, basis was deemed
irrelevant. This applies to the DVR element of Aereo’s service as much as the off premise
antenna.
In October, broadcasters filed a Supreme Court petition for writ of certiorari to review the
Second Circuit Court's ruling. In this petition, the broadcasters argue, technical detail
(surrounding the Cablevision case) trumps common sense and that Aereo’s system should
not preclude considering the transmission of the broadcasters signal a public performance.
On January 10, 2014, the Supreme Court announced it would hear the Aereo case. We
anticipate that arguments will be heard by March and that we should hear something from
the court by mid-June. However, this would not necessarily mean a resolution by mid-June.
For example, the question of whether or not Aereo is an MVPD, and thus subject to
retransmission consent/must-carry rules, is not part of the Supreme Court case (nor is the
same question for an MVPD attempting to offer such a service itself).
Additionally, if a court ruling(s) in Aereo’s favor were to offer MVPDs a way to bypass
retransmission consent, it is possible that Congress could look to pass legislation eliminating
such an end-run around retrans. We think support of localism from some regulators and
policy markers gives these parties a vested interest in the viability of the broadcast model,
since the existence of local TV stations is important to disseminate everything from typical,
everyday news to evacuation information in case of emergencies. As a result, we suspect
government intervention would occur under circumstances where a technological innovation
might dislocate the subscription revenue stream for local broadcast TV, although though this
is far from a certainty. As a result, we would not expect a near-term resolution of the issue
that goes against the broadcasters.
While we think a ruling in favor of the broadcasters could be more definitive, further
complicating matters is recent legislation introduced by Senator Jay Rockefeller of West
Virginia, Chairman of the Senate Commerce Committee (the committee with regulatory
review jurisdiction over Cable TV), entitled the Consumer Choice In Online Video Act. The bill
stipulates that antenna-rental services like Aereo, if found to be copyright legal, would not
be subject to the same retransmission consent fees broadcast networks have been extracting
from Pay TV operators. We would note two factors related to this legislation that make it less
concerning from the broadcaster perspective:
1) Our own channel checks tell us there is little real “traction” to get such legislation
passed, as evidenced by the lack of a co-sponsor, and
2) It is unclear if Rockefeller’s committee has the jurisdiction to make Aereo “legal” since it
will likely require intervention from the Judiciary Committee given the importance of
copyright law in the legal framework.
We believe the real risk is less about Aereo than the technology itself, and its potential to be
acquired or copied by the traditional MVPD ecosystem. In particular, if Aereo wins it is
possible that cable providers could start their own ‘Aereos,’ so that they can bypass
retransmission fees, which could cut off an important source of revenue for the
broadcasters. Again, this would depend on the ability of MVPDs to find a way to avoid
retransmission consent/must-carry rules—not just whether or not Aereo violates Copyright
law.
Further, even if the Aereo model were to offer a retransmission consent “end-run”, it would
likely take years to implement as it would likely require new set-top box technology and
customer service support for MSOs to run parallel cable/Aereo-style solutions as well as the
Why We Are Comfortable with the
Aereo Risk (cont’d…)
 The Government and
Regulatory Bodies Would Have to
Sit on the Sideline: If the Supreme
Court rules in favor of Aereo, the
fact that such a ruling appears to
go against the spirit of the
law,may help induce legislators
to make such a copyright
working-around illegal.
Additionally, political support
from some of localism could
result in legislation protecting the
local broadcasters it looks like the
network might be forced to
switch to cable.
 MVPDs Would Have to
Determine Adoption Is Worth the
Investment: Implementation
would likely be more complicated
than just flipping a switch, as new
set-top box technology and
additional customer service
support would probably be
required. Would such investment
be necessary, if it may just result
in the broadcast networks
moving to cable? In the end, the
MVPDs would still have to pay
fees for the content.
 Broadcast Networks Would
Have to Decide to Convert to
Cable, and Not Take Local
Stations with Them: If all of the
above goes wrong, as long as the
local stations are part of a switch
to cable, as part of a national
network of local cable channels,
the ecosystem may still hold
together. While the question of
how much value the local groups
would have to give up is
unknown, they do provide
valuable content of their own.
Even if everything above went
wrong for the broadcasters,
technical and contractual
requirements would likely mean an
“end-run” around retransmission
consent would be years away, and
spectrum should provide valuation
support.
February 4, 2014 33

expiration of existing retransmission consent agreements with MSOs, that wouldn’t be
abrogated by a ruling favorable for Aereo.
There is a natural remedy to the antenna rental “loophole,” which Aereo, and the cable
companies might ultimately use in a bid to end-run around retransmission consent. That is,
for the broadcasters to simply remove their signals from the broadcast landscape and
convert into cable networks. This would not be an easy or “overnight” process as legal
complications would arise for everything from affiliate agreements to programming rights,
while more practical complications would arise from addressable audience size and
commercial CPM rates. However, conversion is possible. In April of 2013, Fox President and
COO Chase Carey implied that the Fox Network would do just that in the event of an Aereo
legal victory. Broadcasters such as Sinclair would have a similar option in a local market.
However, it is unclear what the future of the local affiliate would be in the event of a
broadcast network conversion to a cable network. The local station is not crucial to the
distribution of the network in a cable network model. However, the existing broadcast
networks program only a portion of the day and have no local content to replicate the
current broadcast channel offering (such as local news). It is conceivable that any attempt to
convert a broadcast network into a cable network might involve co-opting the local affiliates
to create a series of “local” cable networks, allowing for a transfer of the existing ecosystem
onto cable.
It is also plausible, and likely more probable, that if an Aereo legal ruling provides MVPDs
with a method to bypass retransmission consent payments, the local affiliates could be
dislocated in a transfer of distribution from broadcast to cable. The broadcast networks
could simply displace the local station content by running inexpensive syndicated
programming during day parts not traditionally programmed by the network. In such a case,
local broadcasters such as Sinclair could be “left out” in the cold, which could present
significant downside risk to the core business. However, restrictions in affiliate agreements
mean this would likely not happen overnight and we believe spectrum provides a floor to
valuation.
Our best industry legal and regulatory sources believe that, ultimately, the existing
ecosystem will survive these legal and regulatory challenges. While it appears that
technology may have gotten ahead of the “letter of the law” (in the context of the
Cablevision case), they tell us it is likely common sense and the “spirit” of the law will
ultimately prevail. That said, there will likely be noisy headlines and potential compromises
along the way. To us, this is where the biggest risk to the local broadcast thesis lies –
essentially in the unknowable, until the issue is ultimately resolved.
Other Risks
The ability to renew FCC licenses and continue to operate stations under outsourcing
agreements without violating FCC ownership limitations. Licenses are provided to TV
stations by the FCC, at a maximum duration of eight years.
25
Renewals are granted if the FCC
finds that that station has “served the public interest,” and the licensee has not seriously
violated the Communications Act or violated rules in a way that “would constitute a pattern
of misconduct.”
26
25
SBGI 2012 10-K
26
SBGI 2012 10-K
February 4, 2014 34

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